Japanese chemicals show signs of recovery

The Japanese chemicals sector is showing signs of recovery, owing to reconstruction demand in the wake of the 2011 Tohoku earthquake and tsunami, as well as the government’s bold new monetary and spending policies.

The turnaround has been attributed to an increase in foreign exports driven by a weaker Yen and more public spending. Mitsui Chemicals and Tokuyama both managed to absorb increased raw material and fuel costs by improving sales of high-value-added products. Both companies returned from net loss in the first half of last year to positive figures in 2013.

Sumitomo Chemical performed the biggest recovery, from a net loss of ¥13 billion (£83 million) for the fiscal first half last year, to a net profit of ¥12.5 billion this year – largely driven by a sales increase of 9.3% to ¥1.05 trillion. Asahi Kasei, Mitsubishi Chemical, Tosoh and Kuraray also saw increased net profits.

Against almost flat sales relative to the first half of last year, Ube saw a 21.4% drop in net profit to ¥6.6 billion (£41.6 million). The fall is partially attributed to caprolactam market competition from new Chinese facilities and patents expiring for some of its pharmaceutical products. The company has engaged measures to solve various operational tasks and regain growth but these have yet to deliver results.

Showa Denko was even less fortunate – reporting a 40% fall in net profit to ¥6.7 billion, despite a massive increase in petrochemicals sales. Decreased profits in its electronics business and a higher income tax bill contributed to the loss.